November 15, 2011
China: Policy Un-tightening
We had argued that Premier Wen’s speech delivered in
late October should have marked the beginning of
policymakers’ rhetorical changes, to be followed by
policy “un-tightening” instead of major stimulus. The
latest developments since then have been very much in
line with our views. Meanwhile, our headline MSCLI
eased quickly in the face of softening domestic and
external demand. Looking ahead, the economy will likely
grow below its underlying trend level in the coming
months, but the ongoing policy un-tightening and
targeted easing could help lift business confidence and
sentiment. This would in turn provide strong support to
steady and moderate growth ahead, in our view.